Earned income.

Earned income.

• A. Unearned income
• B. Portfolio income
• C. Passive income
• D. Earned income

Answer: (D)

Earned income is money you receive as a result of work or providing a service. It includes wages, salaries, commissions, bonuses, and tips—basically compensation for labor. This category is earned through active effort and is taxed as ordinary income, with payroll taxes applying to most of it. This differs from other types of income. Unearned income comes from sources other than work, such as interest, dividends, rents, or government benefits. Portfolio income refers specifically to returns from investments like interest, dividends, and capital gains from selling assets. Passive income comes from activities in which you don’t actively participate, such as rental income where you’re not materially involved. Since the defining feature is that the income results from labor or services you provide, earned income is the correct label.

Earned income is money you receive as a result of work or providing a service. It includes wages, salaries, commissions, bonuses, and tips—basically compensation for labor. This category is earned through active effort and is taxed as ordinary income, with payroll taxes applying to most of it.

This differs from other types of income. Unearned income comes from sources other than work, such as interest, dividends, rents, or government benefits. Portfolio income refers specifically to returns from investments like interest, dividends, and capital gains from selling assets. Passive income comes from activities in which you don’t actively participate, such as rental income where you’re not materially involved.

Since the defining feature is that the income results from labor or services you provide, earned income is the correct label.